Personal Umbrella Policy

Personal Umbrella Insurance

Personal umbrella insurance (PELP) is coverage that protects your home, property and assets when your home or auto insurance coverage is exhausted.

Example: You’re in an accident where the judge awards the other party $1 million. Your insurance covers up to $500,000, so you’re responsible for the remaining $500,000. Your umbrella insurance will help pay the remaining amount.

Progressive offers limits up to $5 million in umbrella insurance coverage to help protect your home, cars, savings — and your lifestyle.

Murphy Insurance offers competitive rates for personal umbrella insurance. Talk to us today to see if a personal umbrella insurance policy is right for you.

More on Umbrella Policies

Personal Umbrella insurance is additional liability insurance, designed to pay out on top of your existing auto and homeowner’s/renter’s insurance policies. For example, you may only have $300,000 in liability coverage on your car insurance. If you are hit with a claim of $1,000,000, you would be on the hook for $700,000 yourself unless you had an adequate umbrella insurance policy. Here is a diagram explaining this from MSN Money:

In addition, an umbrella policy can also “fill in the gaps” by providing coverage for other incidents like liability for rental properties or being sued for slander or libel. Imagine working and saving for decades, only to have all of it taken away with one incident. Here are my reasons for buying an umbrella policy:

#1. Unlikely, But Actual Scenarios

These days, there are many scenarios where one might be sued for more than $100,000 or even $1,000,000. In my mind, the most likely event is to be found at fault in a car accident. Medical costs alone can exceed $100,000 per person easily. Now imagine if there were 2, 4, or even 6 people in the car. Imagine if some of them were children. Here is one example from a NY Times article on umbrella policies:

One of Mr. Cox’s clients crashed into the rear of a car on a slick highway. A woman and a child were critically injured. After two years of litigation, his client settled the lawsuit for more than $5 million. The client had $15 million in umbrella coverage. The policy paid for the settlement and all legal costs. “Without the umbrella,” Mr. Cox said, “they would have been completely wiped out.”

More recently, I read about a parent chaperone during a field trip being hit with a $700,000 verdict for negligence:

Lauren Crossan, of Randolph, N.J., had traveled to Hawaii in 2004 with Susanne Sadler, Sadler’s daughter, and another New Jersey cheerleader to perform in the halftime show of the Hula Bowl. Within hours of her arrival at the Hyatt Regency Maui Resort, Crossan was seen drinking alcohol. Her body was found the next day on the hotel grounds.

An arbitrator determined last month that Sadler was partially responsible for Crossan’s death and ordered her to pay $690,000 to Crossan’s parents and her estate.

More:

A blogger writes something bad about a company and gets sued for defamation.

A man was asked to cut down a tree from his own yard. He refused, and later a hurricane blew the tree down and injured someone in the neighboring house.

Your child gets in a fight at school, and injures another student.

Your dog bites someone.

You have a pool, and a visitor hurts themselves.

A handyman or contractor hurts themselves on your property.

#2. Have the Insurance Company Lawyers Take Your Side

Forget even getting a large jury verdict against you. If someone simply sues you for a frivolous reason, you’ll have to pay for a $400/hour lawyer to defend yourself. With an adequate umbrella policy, the money at risk will be the insurance companies instead of your own. That means the big corporate lawyers will be on your side, and yourdefense costs will be covered as part of the umbrella policy.

#3. It’s Cheap, and Easy To Buy

It cost us about $350 a year for $1 million in coverage, including 2 cars and a house. That’s basically less than a $1 a day. However, you may need to raise your liability limits of our auto and homeowner’s policies slightly to $500,000 each. So if you are only carrying the bare minimum required by law (not a good idea for most people), your actual additional costs may be higher.

It is really simple to get as well; we can add an umbrella policy to your existing policies with just one phone call. No long application or additional fees. And don’t think we are recommending an umbrella policy simply because it is an extra sale for us. The $350 a year results in a very tiny commission. We are recommending it because it is the right thing to do. You may go your entire life and never be involved in a situation where the umbrella policy kicks in…. but that slim chance that a tiny error or accident could wipe out everything you have worked your entire life for is simply greater than that $1 a day that you would would have spent at Starbucks.

#4. One Less Thing To Worry About

Some people believe that you may be a bigger target for lawsuits if someone finds out you have a $1 million umbrella policy. Here’s how I look at it. If I really wanted to premeditate a lawsuit against someone, I’d pick someone who is worth a lot more than $1M. More like $10 million and up. Even if I was frivolously sued, again the whole point is that I’m still covered. To me, this argument is like saying you shouldn’t earn more money because someone will sue you for it.

In the end, we have a $1 million umbrella insurance policy because this is exactlywhat insurance is for – to protect you from unlikely yet possibly catastrophic events. The likelihood is low, but so is the cost. We chose $1M somewhat arbitrarily because it covers our net worth and also what I feel is a reasonable amount of likely claims. As inflation (and especially medical costs) rises, I could see upping it to $2M since the additional cost is only about another $100/year.